Despite recent stock market volatility, there has been a steady influx of restaurant IPOs over the past year – a trend investors expect to continue.
These restaurant chains, many of which are smaller and in an early stage of their lifecycles, are being drawn to IPOs due to historically high valuations, with investors showing intense interest in any concept that promises strong sales, the potential for development and steady growth.
However, even if a chain has an impressive debut on the market, it must prove to investors that it can perform – and continue to perform well – if it wants to be rewarded.
And while there’s no guarantee of success, there are two key things that a growing chain needs both before taking the company public, to help ensure IPO success, and after taking the company public, to continue to increase the value of the brand.
- Open More Successful Locations: Growth chains need to prove to investors that they’re not just opening new locations, but rather that they’re consistently opening new stores with a high rate of return. When chains do that, investors know that the company has a proven site selection strategy and knows which markets to enter.
- Grow Your Customer Base: While positive same-store sales are good for business, a more important measure is the number of new customers acquired. Growing your customer base requires investment in market expansion, strong product-to-market fit and targeted marketing to your best potential customers.
While these two steps may seem completely obvious, they’re actually much harder to accomplish than many may realize.
But they don’t need to be.
By using customer analytics, restaurant executives can develop detailed customer profiles that offer a wealth of knowledge not only in the realm of demographics/psychographics, but also where their customers live and how far they’re willing to drive to any given location.
With this customer profile, they have the ability to search trade areas all across the U.S. to find other consumers that match this profile.
And when they find trade areas with large concentrations of consumers who have the same characteristics as their best customers, they’ve discovered fertile ground for new locations.
From there, executives can examine specific sites in order to identify the ones nearest to the greatest number of potential customers.
Taken a step further, by using customer profiles, it’s possible to tailor marketing efforts and messages as well as product offerings to specific audiences instead of basing decisions on generalizations about the “average” customer.
The Bottom Line
Companies that have volatile growth patterns are not going to attract the same attention from investors as those companies that have a clear growth forecast for what’s going to happen 2 months to 2 years down the line.
So if the growth chains are able to fulfill these recommendations, not only will the concept grow, but investors will also have confidence in the business.
If you’re interested in taking your restaurant chain public, talk to us and let’s make sure you’re taking the right steps for a successful future.
